Exhibit 10.40.2
ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995,
between ACTV, INC., a Delaware corporation, having an office at 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "Employer")
and XXXXXXX X. XXXXXXX, an individual residing at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer employs, and desires to continue to employ,
Employee as Chairman of the Board of Directors and Chief Executive Officer of
Employer; and
WHEREAS, Employee is willing to continue to be employed as the
Chairman of the Board of Directors and Chief Executive Officer of Employer in
the manner provided for herein, and to perform the duties of the Chairman of the
Board of Directors and Chief Executive Officer of Employer upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows:
1. EMPLOYMENT OF CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER.Employer hereby employs Employee as Chairman of the Board of Directors
and Chief Executive Officer of Employer.
2. TERM.
a. Subject to Section 10 below and further subject to Section
2(b) below, the term of this Agreement shall end on December 31, 2005. Each 12
month period from January 1 through December 31 during the term hereof shall be
referred to as an "Annual Period." During the term hereof, Employee shall devote
substantially all of his business time and efforts to Employer and its
subsidiaries and affiliates.
b. Subject to Section 10 below, unless the Board of Directors
of the Company (the "Board") of Employer shall determine to the contrary and
shall so notify Employee in writing on or before the end of any Annual Period,
then at the end of each Annual Period, starting December 31, 2001, the term of
this Agreement shall be automatically extended for one (1) additional
Annual Period to be added at the end of the then current term of this Agreement.
3. DUTIES. The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings of
the stockholders and the Board, shall perform any and all related duties and
shall have any and all powers as may be prescribed by resolution of the Board,
and shall be available to confer and consult with and advise the officers and
directors of Employer at such times that may be required by Employer. Employee
shall report directly and solely to the Board.
4. COMPENSATION.
a. (i) Employee shall be paid a minimum of $395,000 for
each Annual Period. Employee shall be paid periodically in accordance with the
policies of the Employer during the term of this Agreement, but not less than
monthly.
(ii) Employee is eligible for yearly bonuses, if any,
which will be determined and paid in accordance with policies set from time to
time by the Compensation Committee of the Board.
(iii)Employee shall be entitled to a leased car of
his choice.
b. (i) In the event of a "Change of Control" whereby
(A) A person (other than a person who is an officer
or a Director of Employer on the effective date hereof), including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes, or
obtains the right to become, the beneficial owner of Employer securities having
30% or more of the combined voting power of then outstanding securities of the
Employer that may be cast for the election of directors of the Employer;
(B) At any time, a majority of the Board-nominated
slate of candidates for the Board is not elected;
(C) Employer consummates a merger in which it is not
the surviving entity;
(D) Substantially all Employer's assets are sold; or
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(E) Employer's stockholders approve the dissolution
or liquidation of Employer; then
(ii) (A) All stock options, warrants and stock
appreciation rights ("Rights") granted by Employer to Employee under any plan or
otherwise prior to the effective date of the Change of Control, shall become
vested, accelerate and become immediately exercisable; and in addition the
employee, at his option, shall receive a special compensation payment for the
exercise cost of all vested options upon exercising those options any time
within twelve months after the effective date of the change of control, adjusted
for any stock splits and capital reorganizations having a similar effect,
subsequent to the effective date hereof. In the event Employee owns or is
entitled to receive any unregistered securities of Employer, then Employer shall
use its best efforts to effect the registration of all such securities as soon
as practicable, but no later than 120 days after the effective date of the
registration statement; provided, however, that such period may be extended or
delayed by Employer for one period of up to 60 days if, upon the advice of
counsel at the time such registration is required to be filed, or at the time
Employer is required to exercise its best efforts to cause such registration
statement to become effective, such delay is advisable and in the best interests
of Employer because of the existence of non-public material information, or to
allow Employer to complete any pending audit of its financial statements;
(B) If at any time within three years of the said
Change of Control, Employee is not retained as Chief Executive Officer or
substantially similar position of Employer or the surviving entity, as
applicable, under terms and conditions substantially similar to those herein,
then in addition, Employee shall be eligible to receive a one-time cash bonus,
equal on an after-tax basis to two times his average compensation for the two
previous fiscal years. Such compensation shall include salary, bonus, and
restricted stock awards. To effectuate this provision, the bonus shall be
"grossed-up" to include the amount necessary to reimburse Employee for his
federal, state and local income tax liability on the bonus and on the "gross-up"
at the respective effective marginal tax rates. In no event shall this bonus
exceed 2.7 times Employee's average compensation for the two previous fiscal
years. Said bonus shall be paid within thirty (30) days of the Change of
Control.
c. Employer shall include Employee in its health insurance
program available to Employer's executive officers.
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d. Employer shall maintain a life, accidental death and
dismemberment insurance policy on Employee for the benefit of a beneficiary
named by Employee in an amount not less than $2,000,000. Ownership of the policy
shall be assigned to Employee upon termination of Employee's employment under
this Agreement.
e. (i) A bonus plan shall be instituted for Employee which
shall take account of the efforts of Employee in generating value to Employer's
shareholders. Under said plan, Employee shall be entitled to an annual bonus
payable for each 12 month period commencing April 1, 1995 in cash and/or
unregistered securities of Employer, at the option of the Compensation Committee
of the Board, equal to 2% of the increase for said 12 month period in the total
market capitalization of Employer calculated upon the excess of the total of the
average daily closing price (if applicable) of each class of Employer's shares
for the last 90 days of the 12 month period, multiplied by the number of shares
of each class outstanding as reported by Employer's Certified Public
Accountants, (the "90 Day Average") over the Base, which shall be the highest
previous 90 Day Average against which a bonus was paid under this bonus plan.
Should the Compensation Committee elect hereunder to pay Employee in
unregistered securities, said securities shall be valued at 60% of either the
most recent 90 Day Average or 60% of the closing price on a day designated for
payment, in the discretion of the Compensation Committee. Should Employer's
shares no longer be publicly traded, the current 90 Day Average shall be
determined by a 3 person panel, 1 person appointed each by Employer and Employee
and 1 appointed by the former 2.
The Employee shall be entitled to receive compensation under
this plan for five fiscal years following expiration or termination of this
employment contract, including if pursuant to, Section 10(a)(ii), except that if
Employee is terminated for cause as defined in Section 10.a.(i) hereof or
resigns under section 10 (b)(ii) then said compensation shall continue for three
fiscal years.
Furthermore, in certain years the Employee's right to
retain the entire amount of the bonus paid to the Employee under this Section
4(e)(i) may be subject to forfeiture upon the termination of the Employee's
employment with Employer under either Section 10(a)(i) or 10(b)(ii) hereof
during a defined time period mutually agreed upon between the Compensation
Committee and the Employee.
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(ii) Employee shall also be entitled to participate
pari passu in any other program established by Employer pursuant to which any
executive officers receive a share of the profits of Employer.
f. Employee shall have the right to participate in any other
employee benefit plans established by Employer.
g. Unless a pre-existing plan of Employer expressly forbids
it, all Rights which
may become exercisable during the term hereof shall be paid for in cash only if
Employee so elects, otherwise they may be paid for
(i) by the transfer by Employee to Employer of so much of
Employee's Rights which, when valued at the highest trading price of the
underlying securities of Employer during the previous six months, will offset
the price of the Rights then being exercised;
(ii) by means of a recourse Note with interest at the lowest
rate, if any, required to be charged by any governmental authority, to accrue
and become due and payable with the principle, in an amount no greater than the
exercise price, given by Employee to Employer and secured by the shares of stock
being paid for thereby, which Note shall become due and payable at the earlier
of the expiration hereof or, on a pro rata basis, the sale by Employee of all or
part of the Rights or underlying stock which constitute security for the Note;
or
(iii) by any combination of cash and (ii) or (i), above.
5. BOARD OF DIRECTORS. Employer agrees that so long as this Agreement
is in effect, Employee will be nominated to the Board as part of management's
slate of Directors.
6. EXPENSES. Employee shall be reimbursed for all of his actual
out-of-pocket expenses incurred in the performance of his duties hereunder,
provided such expenses are acceptable to Employer, which approval shall not be
unreasonably withheld, for business related travel and entertainment expenses,
and that Employee shall submit to Employer reasonably detailed receipts with
respect thereto.
7. VACATION. Employee shall be entitled to receive three (3) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used
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shall be paid at the salary rate of Employee in effect at the time of employment
separation.
8. SECRECY. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning (a) internal affairs or proprietary business
operations of Employer or (b) any trade secrets, new product developments,
patents, programs or programming, especially unique processes or methods.
9. COVENANT NOT TO COMPETE. Employee acknowledges and confirms that the
Company is placing its confidence and trust in Employee. Accordingly, Employee
covenants and agrees that he/she will not, during the term of his/her
employment, and for a period of one (1) year thereafter, either directly or
indirectly, engage in any business, either directly or indirectly (whether as a
creditor, guarantor, financial backer, stockholder, director, officer,
consultant, advisor, employee, member, inventor, producer, or otherwise), with
or for any company, enterprise, institution, organization or other legal entity
(whether a sole proprietorship, a corporation, a partnership, a limited
liability company, an association, or otherwise, and whether or not for profit),
which is in competition with the ACTV Business (as defined herein). As used in
this Agreement, the term "ACTV Business" shall mean the invention, development,
application, implementation, extension, operation and/or management by ACTV
and/or any ACTV affiliate of any invention, software, technology, business,
service or product of ACTV and/or any ACTV affiliate, including without
limitation the convergence and digital television technologies commonly referred
to by ACTV as "Individualized Television", "HyperTV" and "eSchool".
Furthermore, Employee will not during the term of his/her employment,
and for a period of one (1) year thereafter, individually or through any entity,
directly or indirectly, without the express prior written consent of ACTV,
become an employee, consultant, advisor, director, officer, producer, partner or
joint or co-venturer of or to, or enter into any contract, agreement or
arrangement with, any entity or business venture of any kind to or of which ACTV
and/or any ACTV affiliate is a licensor or licensee or with which ACTV and/or
any ACTV affiliate is a joint or co-venturer, partner or otherwise engaged in
any on-going business relationship or discussions or negotiations with a view to
entering into such a relationship to provide services or products. Nor shall
Employee, during the term of his/her employment, and for a period of three (3)
years thereafter, individually or through any entity, directly or indirectly,
without the express prior written consent of ACTV,
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make or otherwise extend any offer of full-time or part-time employment to any
officer or employee of ACTV and/or of any ACTV affiliate, or otherwise solicit
any officer or employee of ACTV and/or of any ACTV affiliate to seek or accept
any full-time or part-time employment, by or with any person or entity other
than ACTV or any ACTV affiliate.
Employee hereby acknowledges and agrees that the ACTV Business extends
throughout the United States, and that -- given the nature of the ACTV Business
-- ACTV and/or any ACTV affiliate can be harmed by competitive conduct anywhere
in the United States. Employee therefore agrees that the covenants not to
compete contained in this Section 8 shall be applicable in and throughout the
United States, as well as throughout such non-U.S. areas in which ACTV and/or
any ACTV affiliate may be (or has prepared written plans to be) doing business
as of the date of termination of Employee's employment. Employee further
warrants and represents that, because of his/her varied skill and abilities,
he/she does not need to compete with the ACTV Business, and that this Agreement
will therefore not prevent him/her from earning a livelihood. Employee
acknowledges that the restrictions contained in this Section 8 constitute
reasonable protections for ACTV and its affiliates in light of the foregoing and
in light of the promises to Employee contained herein. Employee and the Company
hereby agree that, if the period of time or the scope of the restrictive
covenant not to compete contained in this Section 8 shall be adjudged
unreasonable by any proper arbiter of a dispute hereunder, then the period of
time and/or scope shall be reduced accordingly, so that this covenant may be
enforced in such scope and during such period of time as is judged by such
arbiter to be reasonable.
10. TERMINATION.
a. TERMINATION BY EMPLOYER
(i) Employer may terminate this Agreement upon
written notice for Cause. For purposes hereof, "Cause" shall mean (A) engaging
by the Employee in conduct that constitutes activity in competition with
Employer; (B) the conviction of Employee for the commission of a felony; and/or
(C) the habitual abuse of alcohol or controlled substances. Notwithstanding
anything to the contrary in this Section 10(a)(i), Employer may not terminate
Employee's employment under this Agreement for Cause unless Employee shall have
first received notice from the Board advising Employee of the specific acts or
omissions alleged to constitute Cause, and such acts or omissions continue after
Employee shall have had a reasonable
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opportunity (at least 10 days from the date Employee receives the notice from
the Board) to correct the acts or omissions so complained of. In no event shall
alleged incompetence of Employee in the performance of Employee's duties be
deemed grounds for termination for Cause.
(ii) Employer may terminate Employee's employment
under this Agreement if, as a result of any physical or mental disability,
Employee shall fail or be unable to perform his duties under this Agreement for
any consecutive period of 90 days during any twelve-month period. If Employee's
employment is terminated under this Section 10(a)(ii): (A) for the first six
months after termination, Employee shall be paid 100% of his full compensation
under Section 4(a) of this Agreement at the rate in effect on the date of
termination, and in each successive 12 month period thereafter Employee shall be
paid an amount equal to 67% of his compensation under Section 4(a) of this
agreement at the rate in effect on the date of termination; (B) Employer's
obligation to pay life insurance premiums on the policy referred to in Section
4(d) shall continue in effect until five years after the date of termination;
and (C) Employee shall continue to be entitled, insofar as is permitted under
applicable insurance policies or plans, to such general medical and employee
benefit plans (including profit sharing or pension plans) as Employee had been
entitled to on the date of termination. Any amounts payable by Employer to
Employee under this paragraph shall be reduced by the amount of any disability
payments payable by or pursuant to plans provided by Employer and actually paid
to Employee.
(iii) This agreement automatically shall terminate
upon the death of Employee, except that Employee's estate shall be entitled to
receive any amount accrued under Section 4(a) and the pro-rata amount payable
under Section 4(e) for the period prior to Employee's death and any other amount
to which Employee was entitled of the time of his death.
b. TERMINATION BY EMPLOYEE
(i) Employee shall have the right to terminate his
employment under this Agreement upon 30 days' notice to Employer given within 90
days following the occurrence of any of the following events (A) through (F) or
within three years following the occurrence of event (G):
(A) Employee is not elected or retained as
Chairman of the Board of Directors, and Chief Executive Officer of Employer.
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(B) Employer acts to materially reduce
Employee's duties and responsibilities hereunder. Employee's duties and
responsibilities shall not be deemed materially reduced for purposes hereof
solely by virtue of the fact that Employer is (or substantially all of its
assets are) sold to, or is combined with, another entity, provided that Employee
shall continue to have the same duties and responsibilities with respect to
Employer's interactive business, and Employee shall report directly to the chief
executive officer and/or board of directors of the entity (or individual) that
acquires Employer or its assets. (C) Employer acts to change the geographic
location of the performance of Employee's duties from the New York Metropolitan
area. For purposes of this Agreement, the New York Metropolitan area shall be
deemed to be the area within 10 miles of midtown Manhattan.
(D) A Material Reduction (as hereinafter
defined) in Employee's rate of base compensation, or Employee's other benefits.
"Material Reduction" shall mean a ten percent (10%) differential;
(E) A failure by Employer to obtain the
assumption of this Agreement by any successor;
(F) A material breach of this Agreement by
Employer, which is not cured within thirty (30) days of written notice of such
breach by Employer;
(G) A Change of Control.
(ii) Anything herein to the contrary notwithstanding,
Employee may terminate this Agreement upon thirty (30) days written notice.
c. If Employer shall terminate Employee's employment other
than due to his death or disability or for Cause (as defined in Section 10(a)(i)
of this Agreement), or if Employee shall terminate this Agreement under Section
10(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain.
d. Upon termination for any reason except death, Employee
shall have the right to an office of his choice and to
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an area for an assistant as long as the company has a lease at 000 Xxxx Xxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and for as long as the Employee reimburses the
company the reasonable pro-rata rental cost.
11. CONSEQUENCES OF BREACH BY EMPLOYER; EMPLOYMENT TERMINATION
a. If this Agreement is terminated pursuant to Section
10(b)(i) hereof, or if Employer shall terminate Employee's employment under this
Agreement in any way that is a breach of this Agreement by Employer, the
following shall apply:
(i) Employee shall receive as a bonus, and in
addition to his salary continuation pursuant to Section 10.c., above, a cash
payment equal to the Employee's total base salary as of the date of termination
hereunder for the remainder of the term plus an additional amount to pay all
federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination;
except that if this Agreement is terminated pursuant to Section 10(b)(i)(G),
then Employee shall not be entitled to receive a bonus under this Section
11.a.(i) but shall instead receive a lump-sum payout of Employee's total base
salary for the remainder of the term plus an additional amount to pay all
federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination.
(ii) Employee shall be entitled to payment of any
previously declared bonus and additional compensation as provided in Section
4(a), (b) and (e) above.
b. In the event of termination of Employee's employment
pursuant to Section 10(b)(i) of this Agreement, the provisions of Section 9
shall not apply to Employee.
12. REMEDIES
Employer recognizes that because of Employee's special
talents, stature and opportunities in the interactive television industry, and
because of the special creative nature of and compensation practices of said
industry and the material impact that individual projects can have on an
interactive television company's results of operations, in the event of
termination by Employer hereunder (except under Section 10(a)(i) or (iii), or in
the event of termination by Employee under Section 10(b)(i) before the end of
the agreed term, Company
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acknowledges and agrees that the provisions of this Agreement regarding further
payments of base salary, bonuses and the exercisability of Rights constitute
fair and reasonable provisions for the consequences of such termination, do not
constitute a penalty, and such payments and benefits shall not be limited or
reduced by amounts' Employee might earn or be able to earn from any other
employment or ventures during the remainder of the agreed term of this
Agreement.
13. EXCISE TAX. In the event that any payment or benefit received or to
be received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
14. ARBITRATION. Any controversies between Employer and Employee
involving the construction or application of any of the terms, provisions or
conditions of this Agreement, save and except for any breaches arising out of
Sections 8 and 9 hereof, shall on the written request of either party served on
the other be submitted to arbitration. Such arbitration shall comply with and be
governed by the rules of the American Arbitration Association. An arbitration
demand must be made within one (1) year of the date on which the party demanding
arbitration first had notice of the existence of the claim to be arbitrated, or
the right to arbitration along with such claim shall be considered to have been
waived. An arbitrator shall be selected according to the procedures of the
American Arbitration Association. The cost of arbitration shall be born by the
losing party or in such proportions as the arbitrator shall decide. The
arbitrator shall have no authority to add to, subtract from or otherwise modify
the provisions of this Agreement, or to award punitive damages to either party.
15. ATTORNEYS' FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
16. ENTIRE AGREEMENT; SURVIVAL. This Agreement, which was modified
January 18, 2001, contains the entire agreement
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between the parties with respect to the transactions contemplated herein and
supersedes, any prior agreement or understanding between Employer and Employee
with respect to Employee's employment by Employer. The unenforceability of any
provision of this Agreement shall not effect the enforceability of any other
provision. This Agreement may not be amended except by an agreement in writing
signed by the Employee and the Employer, or any waiver, change, discharge or
modification as sought. Waiver of or failure to exercise any rights provided by
this Agreement and in any respect shall not be deemed a waiver of any further or
future rights.
b. The provisions of Sections 4, 8, 9, 10(a)(ii), 10(a)(iii),
10(c), 11, 12, 13, 14, 15, 18, 19 and 20 shall survive the termination of this
Agreement.
17. ASSIGNMENT. This Agreement shall not be assigned to other parties.
18. GOVERNING LAW. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the state of New York, without regard to the conflicts of laws principles
thereof.
19. NOTICES. All notices, responses, demands or other communications
under this Agreement shall be in writing and shall be deemed to have been given
when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed),
provided that a copy is mailed by registered or certified mail, return receipt
requested; or
c. received by the addressee as sent be express delivery
service (receipt requested) in each case to the appropriate addresses, telex
numbers and telefax numbers as the party may designate to itself by notice to
the other parties:
(i) if to the Employer:
ACTV, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attention: Day Xxxxxxxxx
Telephone: (000) 000-0000
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Xxxxxxx, Xxxxxx, Xxxxxxxxx LLP
000 Xxxx 00 Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Telefax: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to the Employee:
Xxxxxxx X. Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
20. SEVERABILITY OF AGREEMENT. Should any part of this Agreement for
any reason be declared invalid by a court of competent jurisdiction, such
decision shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the day
and year first above written.
ACTV, INC.
By:_________________________
Day X. Xxxxxxxxx
Senior Vice President and
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General Counsel
_________________________
XXXXXXX X. XXXXXXX
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